Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/29739
Authors: 
Ensthaler, Ludwig
Giebe, Thomas
Year of Publication: 
2009
Series/Report no.: 
DIW Discussion Papers 880
Abstract: 
A budget-constrained buyer wants to purchase items from a shortlisted set. Items are differentiated by quality and sellers have private reserve prices for their items. Sellers quote prices strategically, inducing a knapsack game. The buyer's problem is to select a subset of maximal quality. We propose a buying mechanism which can be viewed as a game theoretic extension of Dantzig's greedy heuristic for the classic knapsack problem. We use Monte Carlo simulations to analyse the performance of our mechanism. Finally, we discuss how the mechanism can be applied to award R&D subsidies.
Subjects: 
Auctions
subsidies
market design
knapsack problem
JEL: 
D21
D43
D44
D45
Document Type: 
Working Paper

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